Cannabis Biotechs Could be Big Pharma’s Latest M&A Focus

NetworkNewsWire Editorial Coverage: In late October, President Donald Trump called the ongoing opioid epidemic the “worst drug crisis in American history” before declaring it a public health emergency and pledging the nation’s full resolve in overcoming it. These efforts could mark a changing of the tides as they relate to opioid painkillers, and Big Pharma is already eyeing its next moves. As reported by Reuters in June of this year, a handful of major drug makers are exploring M&A opportunities within the cannabis-based pain reliever market in hopes of cashing in on rising demand for opioid substitutes and a variety of other indications for which cannabis-based therapies show considerable market potential. InMed Pharmaceuticals, Inc. (CSE: IN) (OTCQB: IMLFF) (IMLFF Profile), with its promising drug development indications and noteworthy IP assets, is one biotech that could be well-positioned to benefit from Big Pharma’s shifting focus toward the cannabis market. As demonstrated by the holdings and acquisition activities of CannaRoyalty Corp. (OTCQX: CNNRF), Aphria, Inc. (OTCQB: APHQF), Maricann Group, Inc. (CSE: MARI) and Aurora Cannabis, Inc. (OTCQX: ACBFF), InMed’s promising biosynthesis platform could put it on the radar of some major names seeking entry into one the pharmaceutical industry’s fastest-growing sectors.

Big Pharma’s mass entry into the cannabis space may well be on the horizon, but most industry analysts agree that M&A activity targeting existing cannabis biotechs, not internal research and development efforts, will provide the primary entry pathway. This reliance on M&A deals instead of R&D dollars has become a driving trend in the pharmaceutical industry in recent years, with the value of such transactions hitting $59.3 billion in 2015. The cannabis industry, in particular, features a host of inherent costs, including: dedicated real estate, facility maintenance, and operating expenses, which are requisite for cultivation and subsequent testing. When paired with risks of crop recalls and ongoing concerns related to the use of fertilizers, pesticides and herbicides to improve yields, these factors serve as sizable barriers to entry for relatively inexperienced pharmaceutical firms looking to cash in on the cannabis boom. Additionally, many of these firms with strategic plans for overseas expansion will face an increased level of regulatory burden on plant based products.